In her latest blog for IFA Magazine, Katie Brinsden (pictured), Managing Director at the national, directly- authorised IFA, Truly Independent, why advisers must embrace targeted support and demystify value if we are to shape a future where financial guidance is accessible, affordable, and truly empowering for all.
The Financial Conduct Authority’s “targeted support” initiative represents an attempt to close the gap between personalised advice and simple guidance. The idea is obviously a noble one, even if it sometimes seems tricky to articulate.
According to the FCA’s official explanation, targeted support would see adviser firms “provide a bespoke suggestion to specific groups of consumers who share the same characteristics”. This would help give individuals access to the “guidance and advice they need, at a cost they can afford, when they need it, so that they can make informed decisions”[1].
Ideally, says the FCA, targeted support would be delivered for free. At least that much is easy enough to comprehend.
The initial findings of the Advice Guidance Boundary Review, a key document in determining the way ahead, were published in December. On the whole, they received an enthusiastic welcome.
For example, the FCA was lauded for pressing ahead with reform measures. Its proposals were hailed as “ambitious”. There was even talk of targeted support proving “revolutionary” if correctly implemented[2].
There were plenty of caveats, too. Prospective conflicts of interests, the blurring of dividing lines and the risk of generating confusion rather than clarity were among the concerns raised[3].
But what might we usefully take away from the exercise to date if we set aside the would-be positives and negatives and adopt a somewhat broader view? Here are four “bigger picture” considerations the adviser community might wish to reflect on as this saga continues to unfold.
- Everyone can benefit from financial advice
The concept of financial advice for all is vital to our industry. By extension, it is also vital to the millions of people who could benefit from advisers’ expertise, insight and experience.
The mere notion of targeted support suggests the FCA appreciates as much. This is clearly to be welcomed, since it gives advisers reason to feel the regulator is on their side.
Yet there is a major hurdle to overcome here. The FCA may acknowledge advice’s role in making a positive difference to people’s lives, but the unfortunate reality is that many consumers do not.
- The value of financial advice is still largely misunderstood
Announcing the first insights from the Advice Guidance Boundary Review, the FCA referred to consumers’ “fundamental misunderstandings”[4]. This is a polite way of saying many people still have little or no grasp of what they might derive from financial advice.
Relatively few respondents surveyed for the review knew the cost of advice, with some inferring they could not afford it in any event[5]. Others voiced fears over independence, trust and the nature of commission.
Meanwhile, a number of those questioned believed themselves able to make their own decisions around pensions and investments. As a result, they doubted whether advice would be worthwhile[6].
- Do initiatives like this really work?
Any effort to allow more people to build a secure financial future deserves praise at a basic level. Yet success is by no means guaranteed.
By way of illustration, we can briefly rewind to 2001 and the introduction of stakeholder pensions. The aim was to encourage more long-term saving for retirement, but take-up was embarrassingly meagre. The insurance industry memorably branded such schemes “a flop” within a year[7].
The FCA says targeted support could lead to “more people investing, which will help provide capital necessary to stimulate economic growth”[8]. This all sounds wearily familiar. Today, as in 2001, the assumption that consumers fully understand how they might gain appears fundamentally flawed.
- Advisers must shape their own destiny
It might be tempting to tell ourselves the above points encapsulate problems beyond our control. The advice gap, lack of financial literacy, ineffective “solutions” – these are big-ticket issues that the FCA has an obligation to address, right?
Yes and no. The regulator certainly has a job to do, but so do we. Rather than relying on others to set the agenda, the adviser community must realise it can play a huge part in shaping its own destiny. Every one of us needs to work harder to highlight the importance and appeal of what we do.
If advisers were widely seen as approachable and affordable – and even indispensable – the picture would likely look much rosier for all concerned. Ultimately, we should all ask ourselves what more we could do for our industry and those it seeks to serve.
Katie Brinsden is Managing Director of Truly Independent.
[1] See, for example, Financial Conduct Authority: “Millions of people could get more support with their pensions under new proposals”, December 12 2024 – https://www.fca.org.uk/news/press-releases/millions-people-could-get-more-support-their-pensions-under-new-proposals.
[2] See, for example, Pensions Age: “Industry welcomes FCA’s targeted proposals but warns of issues to overcome”, December 12 2024 – https://pensionsage.com/pa/Industry-welcomes-FCA-s-targeted-support-proposals-but-warns-of-issues-to-overcome.php.
[3] Ibid.
[4] See, for example, FT Adviser: “Targeted support reveals ‘fundamental misunderstandings’ of advice”, December 12 2024 – https://www.ftadviser.com/advice-guidance-boundary/2024/12/12/targeted-support-reveals-fundamental-misunderstandings-of-advice/.
[5] Ibid.
[6] Ibid.
[7] See, for example, Guardian: “Stakeholder pensions flop”, November 23 2002 – https://www.theguardian.com/money/2002/nov/23/politics.business.
[8] See, for example, Financial Conduct Authority: “Millions of people could get more support with their pensions under new proposals”, December 12 2024 – https://www.fca.org.uk/news/press-releases/millions-people-could-get-more-support-their-pensions-under-new-proposals.
